GSAT - NASDAQ

Welcome to the Globalstar First Quarter 2025 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your first speaker today Rebecca Clary, CFO. Please go ahead.

Thank you. Operator, and good afternoon everyone. Before we begin, please note that today's call contains forward looking statements intended to fall within the Safe Harbor provided under the Securities Laws. Factors that could cause the results to differ materially are described in the risk factors section of Globalstar's SEC filings, including its annual report on Form 10K for the financial year ending 2024, and its other SEC filings, as well as today's earnings release, also note that management may reference EBITDA, adjusted EBITDA, free cash flow, or adjusted free cash flow on this call, which are financial measures not recognized under US GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in the earnings release, which is available on our website. I'll begin with a review of our financials, before touching on tariffs and our outlook, I'll then turn it over to Paul to cover key operational updates. Total revenue increased 6% to $60 million compared to the prior year period of 56.5 million service revenue increased 7% driven primarily by wholesale capacity services. Additionally, in commercial IoT, we are pleased to continue to see increases in the average number of subscribers, a high level of customer engagement and the adoption of our IoT devices and service offerings. The increase in revenue contributed to higher adjusted EBITDA, which was up 3% to $30.4 million compared to the prior year's first quarter of $29.6 million. Partially offsetting the effect of the revenue increase were certain cost increases, including expenses incurred to continue to develop and enhance our XCOM RAN product offering. Higher cash costs to support XCOM negatively impacted the change in adjusted EBITDA by 1.3 million, an adjusted EBITDA margin by approximately 200 basis points compared to the comparable prior year period. While there are expected upfront investments to support this technology, we remain bullish that this business will be profitable and contribute meaningfully to Globalstar's future revenue. Moving to our balance sheet, we ended the year with $241.4 million in cash on hand. Net cash flows generated from operations in the quarter were $51.9 million and adjusted free cash flow after excluding reimbursable CapEx for the replacement satellites and extended MSS network for $47.6 million compared to $19.9 million in the prior year's first quarter. Before turning to our outlook, I'd like to spend a minute walking through our assessment of the fluid tariff situation and its potential impact on GlobalStar, our team has worked closely with our partners globally to identify exposure and available levers to offset or mitigate impacts. Based on current available information we believe that we are well positioned to minimize any financial impact given our existing relationships with manufacturing and warehousing partners situated around the globe. Should we see any escalation or further shifts in the trade environment, we have several tools at our disposal to help manage through it. First, we have long standing contract manufacturing relationships that give us the ability to quickly shift production and control costs without disrupting our supply chain. Second our international third party logistics partners provide flexibility and our global footprint allows us to buy and sell in certain jurisdictions with little to no tariff impact. And finally, we believe we have the ability to pass through increased costs in areas where we are affected the most without impacting the competitiveness of our products. These measures, along with others, provide us with flexibility to ensure that we can navigate through the Global Trade challenges. Therefore, we expect a relatively immaterial impact in the near term. To that end, we are reiterating our full year 2025 outlook, and continue to expect revenue in the range of $260 million to $285 million and we anticipate adjusted EBITDA margin of approximately 50% With that, I'd like to turn the call over to Paul Jacobs.

Thanks, Rebecca, it's great to be on the call with all of you today, and I'm pleased to share our progress to start the years. Feel like we executed our plan well. So we continue to see demand for our suite of products and services, with new customers and use cases starting to come online. We've been working hard over the last several quarters to build a strategy and go to market approach to capture the opportunities and drive sustainable long term growth. This has included the launch of an investment in foundational assets with new and expanded partnerships and resulting in innovative products and solutions. We're continuing to bring in new team members with deep expertise in scaling businesses and progressing our wholesale business forward. We successfully launched our two way satellite, IoT solution via Globalstar's low earth orbiting satellite constellation. This marks a significant expansion beyond our traditional one way tracking capabilities, and addresses the rising global demand for reliable low power, low latency command and control systems across critical applications, including fleet tracking, asset monitoring and precision agriculture. This milestone reflects the success of our refocused product development team, who has streamlined priorities and accelerated innovation while leveraging our existing network infrastructure, low cost platform and new state of the art downlink to deliver competitive, commercial IoT solutions to the market quickly. I'm excited by the growth opportunities that we're aggressively pursuing on the space side of our business, now that we have removed the constraints that Globalstar's IoT business has been operating under for quite some time. Additionally, in the first quarter, we opened a new state of the art satellite Operations Control Center at our Covington, Louisiana headquarters. This facility significantly enhances our satellite fleet management capabilities, improves network performance and positions us for future next generation constellation deployments. The grand opening event took place on March 17 and was attended by distinguished guests, including U.S., House Majority Leader Steve Scalise and FCC Chairman Brendan Carr, underscoring the facility's strategic importance to our company, to the country and to the global telecommunications industry as a whole. This investment reinforces Globalstar's leadership in global satellite communications and demonstrates our commitment to economic growth. Turning to some important leadership updates, I'm excited to announce the appointment of two seasoned executives who will drive growth in key business segments. Dr. Tamer Kadous has been promoted to Vice President and General Manager of Terrestrial Network Business, where he will lead our Private Wireless Network Initiative, leveraging Globalstar's XCOM RAN and Band n53 assets. He brings over two decades of experience in wireless communications, having previously served as Vice President of Wireless Engineering at XCOM Labs, Senior Director of Engineering at Qualcomm. Tamer led the team which developed and standardized utilization of cellular technology over the unlicensed bands, which is an area with significant potential for Globalstar. Sure those of you who attended our Analyst and Investor Day in December, remember Tamer. We have also important, appointed Daaman Hejmadi as the Vice President and General Manager of our Wholesale Consumer Business, where he will focus on expanding access to GlobalStar's satellite solutions through strategic wholesale partnerships. Prior to joining us, Daaman held various executive positions, including Vice President of Engineering at Qualcomm, where he transformed the Bangalore Design Center from a small team into a roughly 4000 person engineering powerhouse, contributing approximately $12 billion in revenue. He also served as Corporate Vice President at Intel, where he managed 10,000 engineers across more than 30 sites to advance Intel's process technology leadership. These strategic appointments strengthen our management team and position us to accelerate growth in our key business areas. Moving to some project updates and beginning in our terrestrial business, we continue to see encouraging progress. In March, we participated at the Mobile World Congress Conference in Barcelona, where we demonstrated our XCOM RAN technology and showcased its performance enhancements. This full scale over the air demonstration, using our licensed n53 spectrum, delivered speeds of 400 megabits per second using just 10 megahertz of spectrum. This breakthrough enables advanced applications such as robotics, autonomous vehicles and augmented reality, while offering our partners a versatile, fully licensed channel for enhanced wireless connectivity. These demonstrations were conducted in our 20x30 foot booth using a highly dense adhoc installation of eight of our newly developed XCOM RAN radios and third party state of the art, 5g modules, and highlighted the simplicity of deployment of XCOM RAN and the utility of having our own clear band n53 spectrum in this case, in Spain. Our technological and spectrum assets are highly differentiated, and we expect this system to be available for commercial deployment next quarter. Moving to our wholesale capacity business, we reached a significant milestone with MDA Space during the quarter, as announced in February, MDA Space will be building more than 50 satellites for Globalstar's next generation Leo Constellation under a C$1.1 billion contract. They will base the constellation on their new reprogrammable Aurora platform, which recently passed preliminary design review for their anchor customer, Telesat's light speed network. This development is an important step in the execution of our extended MSS network plans announced in November as part of the $1.5 billion updated expansion agreement with our wholesale customer. We are also excited about the 2025 launch of the first set of replacement satellites manufactured by MDA under our 2022 agreement. We expect to announce more details on our expected launch date soon. Before I turn the call back over to the operator, I know Rebecca provided some details on tariffs, but I want to emphasize that we've established a world class management team that gives us confidence to navigate a dynamic global trade environment and any unexpected headwinds that may arise. We remain very well positioned to execute on our long term growth plans. As announced yesterday, our executives will be attending several conferences over the next two months where we expect to meet investors, and also we are undertaking initiatives to educate our stakeholders directly and broaden our analyst coverage. We certainly feel that Globalstar is an underappreciated story. We have assets in space and on the ground that are differentiated and create a platform for innovation. Our complementary services offer exciting growth potential that we're uniquely equipped to capture. After investing billions in our satellite infrastructure over the years, we've created a powerful network that now supports connectivity for hundreds of millions of devices worldwide. We're seeing this device ecosystem expand consistently with promising growth trajectories in our wholesale partnerships and our IoT and terrestrial network business lines, we remain exceptionally well positioned to execute on our long term growth plans. I'm pleased with the way we started out the year, and I look forward to continuing to execute our on our initiatives this year. I'll now turn the call back to the Operator for Q&A.

[Operator Instructions]. Our first question comes from Mike Crawford of B. Riley Securities.

Thank you. I'm glad to hear you're looking to launch XCOM RAN commercially next quarter, and you remain bullish that's going to be profitable. Can you just walk us through any more of economics or assumptions regarding this business?

In terms of what? In terms of, I mean, we haven't made any announcements on forward looking revenues or so forth. I mean the issue with this is, as we've talked about, our primary initial customer is a very large retailer, and we're very engaged with them, but the sales cycle is long in these kinds of things. And I think we're very confident on moving forward but even in my Qualcomm days, like you never knew when a customer was going to push the button to launch it, often for factors that are completely outside of our control. So we are very engaged with them. Things are moving along. The system is working extremely well, and now we're, you know, kind of looking forward to that next step. We have expanded our direct sales capability in this area too. So we are looking for opportunities beyond the warehouse automation customer that we have right now, and we have gotten some initial contract on the government side as well, on this stuff too. So hopefully that turns into something larger as well.

Okay, Paul, thank you. Maybe I know you've been working to bring more vendors into the ecosystem, like maybe some lower cost radios, maybe to reduce overall bill of materials, that could maybe be something that attracts more interest, including from the large retail customer or others. Is that the progress there?

Yeah. I mean, we absolutely so what we demoed at Mobile World Congress was on our new radios that we're working or that that we built and now we will be commercially deploying. And, yeah, so that not only is it lower cost, but it also gives us a lot of flexibility in terms of the bands that we can cover. So those the ones that we showed off at MWC were Band 53 and CBRS. But as I mentioned in my script, we're super interested in the unlicensed cellular opportunities as well, and the ability to use Band 53 as sort of an anchor channel for that as well. And now we're talking about much larger bandwidths that we could conceivably coordinate and use for customers. So all these, these things are, you know, there's both cost and performance benefits out of having our own radios.

And then using band 53 or n53 as the anchor spectrum become any more or less important given some potential changes in the CBRS, band itself is coordinated with the U.S. Department of Defense?

Yeah, I think you know what's happened with CBRS is that it, you know, people thought it was going to really kick off the private network, cellular network business, and it's been less than expected. And so that's why we feel like having Band 53 is so important that we have something that we can guarantee is available for mission critical applications. And what I've said about private network, I mean, if you decide to use cellular, it's because you have a mission critical application. Otherwise you would have just used WiFi, but when you use it on CBRS, it's still not quite mission critical quality. I mean, it's better than WiFi, but it can come and go depending on whatever happens. So yeah, I think some of those changes may make it more available, but I think that we're in a really good position having a global band of spectrum that can be used as an anchor, like, that's a very differentiated position relative to other players in the market, and particularly when you're thinking about IoT applications, which are global. And so that's, yeah, we're super excited about all those kinds of opportunities, both on the space and the terrestrial side.

Okay, thank you. Just one last question for me is, well, it's really two parts one replenishment constellation. So it's great to hear that first anticipated launches later this year. When would you expect that to be completed, and thus triggering reimbursement of the CapEx that you've incurred to replenish your existing constellation? And then the second part would be when we might have these 50 or more satellites launched in the extended MSS network into operation? Thank you.

Yeah, so we haven't announced when we're launching the launch in the 50, so stay tuned. Obviously, that has -- we have other partners that are involved in making that decision. And the first one was, when will the service fees -- Rebecca you want to just talk to the financial implications?

Sure. The service fees will step up the fees that are tied to the CapEx for those replacement satellites will start being funded once, though that first batch is operational, so once they're providing service.

And that when 17 might be launched, I imagine that's going to be three or four launches to get them all up there?

We're expecting two, and the second launch has not been contracted yet, so more details to come on that.

[Operator Instructions]. Okay, I am showing no further questions at this time. I would now like to turn it back to Paul Jacobs, CEO for closing remarks.

Well, yes, I think we understood that today's earnings call was sort of impacted in terms of attendance by other earnings calls, it's a busy season right now, but we are going to be at a number of conferences coming up, so we'll get a good opportunity to interact with the investors and analysts then and appreciate Mike your comments and questions, and we'll see you soon. And I think, just to close, we really do have a differentiated position. I'm even more excited about it than I have been in the past. The fact that we were able to run over the air at Mobile World Congress was super exciting on the terrestrial side, because that's an extremely contested environment. A lot of companies there all trying to do stuff, and generally nobody is able to do anything over the air, that's significant and we really were able to do that, and that garnered a lot of attention for us. So that's why we also are excited to sort of step up our direct sales there. So yes, it's going to be an interesting year ahead, lot of opportunities, and we'll execute. And also the team's very focused on building out the network for our wholesale partner too. So stay tuned, and we'll continue to deliver on all these initiatives. Thanks very much everyone.